by Satya Nadella will mark his tenth year as CEO of Microsoft on Sunday, capping a decade of spectacular growth as he steers the slow-moving software giant into a laser focus on cloud computing and artificial intelligence.
Microsoft stock has risen more than 1,000% since Nadella took over in 2014, compared with the broader S&P 500’s 185% sequential gain. Microsoft now has a market value of $3 trillion — more than any publicly traded company in the US, including its longtime rival Apple.
“Nadella’s could be the biggest transformation of a technology company ever,” said Wedbush Securities analyst Daniel Ives. “The only person who would compete with him would be (Steve) Jobs coming back to Apple and turning it into the iPhone.”
Microsoft has created $2.8 trillion in shareholder wealth over the past decade, meaning that an investor who bought a $10,000 stake in Microsoft at the time Nadella took over and did nothing with those shares would now be worth about $113,000 .
HOW HAS IT BEEN
“Our industry doesn’t respect tradition — it only respects innovation,” Nadella told employees in an inaugural memo 10 years ago, a foretaste of big changes to come. Microsoft declined requests for an interview.
Now a hero of Wall Street, some were initially skeptical that such a transformation could come from an insider who had already spent 22 years at the Redmond, Washington company. He is only the third CEO of Microsoft, after Steve Ballmer, who lasted for 14 years, and Bill Gates, who co-founded the company in 1975 and took it public in 1986.
Big changes came quickly under Nadella. He directed resources to build the Azure cloud computing platform, a shift in priorities from the company’s longtime reliance on its flagship Windows operating system and the royalties it receives for every PC sold to it. And he largely put the brakes on Microsoft’s ill-fated efforts to catch up in the smartphone market, marked by his predecessor Ballmer’s $7.3 billion acquisition of Nokia’s phone business.
But some of the biggest changes have been in the company’s culture, a shift away from Microsoft’s fearsome external reputation and internal buzz to a more collaborative approach that Nadella has molded into his own collegiate personality and engineer’s mindset.
LEARN-IT-ALL CULTURES
“Microsoft has a reputation for inspiring the troops with competitive fire,” Nadella said in his 2017 autobiography. “The press loves that, but I don’t.”
Nadella’s strength is how he stands out from the “very strong CEO ego,” said Raimo Lenschow, a stock analyst at Barclays who covers 36 technology companies. “Where the future is going, he thinks.”
And “whether it’s the person making food in the cafeteria, an engineer, a financial executive, a customer, he treats everyone the same way, with respect,” Ives said. It’s not just Wall Street analysts who think so.
A tiny startup from Zeeland, Michigan, running a booth at January’s CES gadgets show in Las Vegas, caught a glimpse of Nadella’s curiosity when he showed up, shook founder Tim Murphy’s hand and asked for a demo. The product, Audio Radar, visualizes the sounds in video games for deaf and hard of hearing players.
“It’s very close to the ground,” said Murphy, who was there with a small crew including his 11 sons. “I pitched to him, played a few games, and he was like, ‘What you’re doing is amazing.’ Honestly, I don’t remember too much of what he said because I was so surprised.”
Accessibility of technology has long been a priority for Nadella, informed in part by his experience raising a visually impaired, quadriplegic and cerebral palsy son. Zain Nadella died in 2022.
AI Push
What has brought Microsoft to its latest heights is its emergence as an artificial intelligence leader, setting the agenda for how AI tools could be used in work and society. Although Nadella has been emphasizing AI for most of his tenure, his role was not guaranteed and came after years of careful planning that led to a close partnership with ChatGPT maker OpenAI. (OpenAI pays an undisclosed fee to the Associated Press to license its archive of news stories).
“Historically, if you were a cool startup that was doing something cool, Microsoft wasn’t really your first choice,” Lenschow said. “So getting OpenAI to commit to Azure was a huge win … it gives it a huge competitive advantage over Google and Amazon.”
That position was jeopardized late last year when OpenAI’s board of directors abruptly fired CEO Sam Altman. A weekend of behind-the-scenes maneuvering and a massive employee exodus threatened by Nadella helped bring Altman back and stabilize the startup, ridding it of clients and shareholders. “He dealt with that like he was in the World Series of Poker playing against little kids,” Ives said.
CONTINUOUS CHALLENGES
Nadella’s tenure has not been easy, especially considering how much of the world is so dependent on Microsoft products – sometimes to the frustration of those who use them.
Cybersecurity experts say he has a tendency to sacrifice security for convenience, including in his gung-ho rollout of big AI language models. The company’s trademark suite of work tools, Microsoft Office 365, has also been successfully compromised in recent years in embarrassing high-profile compromises that gave Russian and Chinese cyber operatives access to the email accounts of senior US officials and members of Microsoft’s senior leadership team. .
It stepped in to provide cloud hosting to Ukraine just before the Russian invasion in 2022, but the networks serving NATO allies continue to face intrusion attempts. Because of that, and the worsening ransomware scourge, Nadella called for the Geneva Cyber Convention with Russia and China.
And despite Nadella’s stated rejection of “competitive fire,” Microsoft is again drawing the kind of antitrust scrutiny that killed Gates and Ballmer in previous years. Nadella’s confident testimony at a federal court hearing last summer helped convince a judge not to block Microsoft’s purchase of video game giant Activision Blizzard, but the company is facing another round of questions about its partnership with OpenAI.
None of those challenges are likely to push Nadella, 56, who made $48.5 million in total compensation last year and has been chairman of Microsoft’s board through 2021, from his leadership roles anytime soon.
“From everything I can gather, he’s really enjoying himself,” Lenschow said. “We are in very interesting times. I would expect it to stay for a while.”
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AP technology reporters Michael Liedtke and Frank Bajak contributed to this report.
